FEBRUARY 2010 | www.opp.org.uk Destination focus • Portugal | 33
COVER FEATURE
Paying the price
WORDS | Alex Evans
INDUSTRY
Portugal offers today’s international buyers everything they are looking
for – except the prices they are willing to pay. OPP asks whether
discounts are really the answer to increased sales in 2010
PEOPLE
DESTINATION
Widely viewed as Spain’s are currently around 1.160€/m2 - a We have to face it; the time of sky-high profits is over. Which
BUSINESS
expensive neighbour, Portugal difference of 7%. purchaser or investor is going to fall for this any longer?
has enjoyed much greater price “With the caveat that this is an Everyone knows that profits should be reasonable and
stability than most of its European overview of the entire country, it seems explained by rational calculations and no longer by greed.
competitor destinations. But the cost of to indicate a stable, slow moving Marcella Spee Horta e Costa, Azul Prestige Properties
this stability has been sales, with a market that has regressed to previous
general refusal to discount among levels, but not in an overly dramatic a residential tourism destination, and developers in promoting Portugal
developers sending international way. Compare this to countries such as has consistently been in the top five has rolled on for years, but residential
buyers to markets with a more Latvia and Lithuania where prices have most searched on UK portals including tourism consultancy VIVA IN has
pragmatic attitude – namely Florida, dropped up to 65% in the last 2 years.” Rightmove Overseas and The Move been pro-active in not only creating
Spain and Turkey. Channel – but it’s international profile a new platform for resort developers
Amidst growing concern that Price to sell needs work. under an umbrella Portugal brand
DEVELOPER
Portugal will have another quiet year, While many continue to blame “This market is fantastic for buyers,” (vivainportugal.com) but has organised
OPP talked to developers, agents and Sterling weakness for the decline says Stephen Anderson, managing several conferences and workshops to
master agents about what they are in sales to Brits, others believe that director of agent Infinito Overseas help developers adapt their sales and
doing to attract more international developers seeing a smaller profit as Property. “The quality is perhaps the marketing strategies. The challenge,
buyers, which areas are likely to see the an ‘unacceptable loss’ are maintaining best in Europe for the money, the build though, is convincing developers that
best activity, and what did sell in 2009. Portugal’s ‘over-priced’ image – and this density is low and the property sizes they need to change their attitude
So how bad was last year? “Average is deterring buyers. are generous; the problem is there according to Viva In’s founder, Lucilia
house prices have shown a positive “We have to face it; the time of sky isn’t enough media out there to catch Cruz Pinto.
trend throughout 2009,” observes high profits is over,” says Marcella Spee ‘undecided buyers’ attention. “A lot of developers did nothing last
MARKETING
Richard Mills, director of Azul Homes. Horta e Costa, Commercial Director “Portuguese property owners can year. Some can afford to wait but this
“The average bank evaluation of a of Azul Prestige Properties. “Which benefit from a great rental return, is an option for less and less. There’s
property was higher at the end of purchaser or investor is going to fall and incredibly cheap mortgage rates a need to change and do something
the third quarter of 2009 than at the for this any longer? Everyone knows making the purchase easier and more different together, preferably under an
start of 2009 and bank evaluations that profits should be reasonable and cost effective, but all this is irrelevant if umbrella brand of Portugal. We need to
have returned to a similar value seen explained by rational calculations and it’s not known.” realise that Portugal itself is competing
in 2004. Bank evaluations peaked at no longer by greed.” The debate about the role of with other destinations, and other
around 1.250€/m2 in 2007, and they Portugal has enormous appeal as government, the tourism industry and destinations are winning.”
34 | DESTINATION FOCUS : PORTUGAL www.opp.org.uk | FEBRUARY 2010
Property price comparison – Lisbon vs Algarve
Algarve region includes municipalities of Albufeira, Faro, Lagoa and
the towns of Almancil, Vilamoura and Vila Real de Santo Antonio; Lisbon
INDUSTRY
region includes the districts of Lisboa, Cascais and Oeiras.
Location Property type Size Price (€)
Algarve Apartments 45 sqm 104,265
Algarve Apartments 70 sqm 160,575
Algarve Apartments 120 sqm 209,640
Algarve Apartments 200 sqm 299,200
Algarve Villas 150 sqm 413,400
PEOPLE
Algarve Villas 250 sqm 634,250
Algarve Villas 450 sqm 1,102,950
Location Property type Size Price (€)
Lisbon Apartments 65 sqm 135,070
Lisbon Apartments 120 sqm 341,760
DESTINATION
Lisbon Apartments 200 sqm 450,600
Lisbon Villas 150 sqm 380,850
Lisbon Villas 250 sqm 442,750
Lisbon Villas 350 sqm 521,500
Lisbon Villas 500 sqm 750,500
Source: Global Property Guide, Sept 1, 2009
But it’s also been a tough year for are offered a 0.1% share of the future Europe are keen to help and advise, commission rate, offering 10% to those
BUSINESS
the developers who have invested sale, but the developer claims the low but the time has yet to arrive when the supplying leads and 40% to those
heavily in promotion. Miguel Pereira initial payment (£6750) and low stage advice given is actually taken.” who pre-qualify. It won the OPP Best
de Abreu, CEO of resort developer payments (€2,590) have helped it to Infinito is actively building its Estate Agent Award last year because
Quintas de Obidos, told OPP last month close the first phase. international network to bring more of its network of 60 international
that it achieved 21 sales out of 79 units “For Portuguese developers, I don’t foreign buyers into Portugal, but some agent partners, multi-lingual support
last year. While he maintains that not think the answer is in dropping prices developers are still wary of overseas team and its comprehensive approach
lowering prices, keeping construction to compete with Spain, Cyprus and agents. “We need everyone but some to marketing – even organising
to schedule and an investment in Bulgaria,” says Artur Simes, owner of of the rates being practiced in the consortium stands at shows with
targeted PR helped to maintain agent Atlantic Estates. “For one, I’m international market out there are several developers sharing costs and
confidence, the big question is whether not sure margins are large enough wow!” says Claudio de Sousa, owner of promoting the destination as a whole.
DEVELOPER
discounts would have achieved more. to discount. But, more importantly, Madeira developer Hi Life Homes. “Key developers in the Portuguese
Oceanico’s discount offer on its Prestige Portugal is less affected by the crisis “The norm in Portugal is 5%, but property market need to come
Residence Club in the Autumn of last and does not have the massive we as property developers question together in an association, pool their
year yielded good enquiries but zero excessive inventory of other markets. the overall efficiency of estate agents. limited marketing funds, and develop
sales, according to sales and marketing “We have to be creative in focusing Considering 7%-9% commissions, effective strategies for promoting
director, Nikki Dale. on our strengths, which for Portugal overall margins for the developer to and educating Germans, French,
In December last year, Vigia means, lifestyle and value stability.” reduce.” Austrians, Swiss and more,” says Simes.
announced a Boxing Day sale to slash Master agents like Atlantic Estates “Other residential tourism businesses
prices of holidays and services for End the stalemate - which works with Vigia, Pestana and (including estate agents) should
fractional property at its Parque de Anderson agrees that, in general, Vale do Lobo - charge a standard 5% work together to generate their own
Floresta resort. In the same month, the discounts are not the answer, but
MARKETING
developer at Ponta do Pargo Resort in some are committing commercial A lot of developers did nothing last year. Some can afford
Madeira, Morgan Forbes, increased the suicide by refusing to move on price. to wait but this is an option for less and less. There’s a need
price of a 13th share (to £17,914) to “As businesses, it’s incredible that they to change and do something different together, preferably
coincide with planning consent for the can survive; in fact this may be the last under an umbrella brand of Portugal. We need to realise that
new Nick Faldo designed 27-hole golf generation that can get by on their Portugal itself is competing with other destinations, and other
course in the region. Investors in the family’s land banked assets,” he says. destinations are winning.
five star resort with luxury apart-hotel “Most agents working throughout Lucilia Cruz Pinto, Viva In
FEBRUARY 2010 | www.opp.org.uk Destination focus • Portugal | 35
“Although the lower end markets POSITIVE CHANGE: how some
have been hit severely, the high end developers in Portugal are
residential tourism market remained adapting and innovating to sell...
INDUSTRY
steady throughout and especially
in isolated pockets like Quinta do Martinhal Beach Resort & Hotel in
the Algarve is promoting a Leaseback
Lago in the Algarve and Quinta da
Plan combining both lifestyle and in-
Marinha in Cascais,” observes Ole vestment, with fixed 4% rental return
Jespersen, owner and managing for 10 years on the purchase price,
director of IRG International Realty designer furniture pack included,
Group. “In these areas sales have 4-8 weeks of usage by owner (who
been steady and ongoing although owns the freehold), and the operator
pays the condominium charges. “We
often fuelled by realistic pricing or
are at the stage where we are just
accepted offers.” about to open the region’s first 5-star
The Algarve still gets the most hotel and resort, and this adds to the
PEOPLE
attention, of course. This is borne out confidence of the buyer,” says Martin-
by the latest Quarterly Confidence hal’s Chitra Stern. Another developer
Survey from residential tourism focusing on confidence is Quintas
de Obidos, which has invested in
consultancy ILM THR, which found
targeted PR, an actively managed
that 61.5% of the agents and website and its agent network to sell
developers surveyed reported 79 family villas (all over €1.2m) and
increased sales in Q3. an aparthotel with 80 apartments.
“The launch of the remaining facili-
The loan moan ties - Country Club and Riding Cen-
tre - will further enhance the confi-
DESTINATION
While Portuguese banks like
dence of the potential clients in our
Santander and Banco Espirito Santo resort,” said CEO Miguel Pereira de
were far less exposed to the global Abreu. Hoping to attract high-end
financial crisis than many others buyers, Palácio Estoril Residências,
in Europe, developers and agents a luxury residential condominium
still bemoan the lack of finance in in Estoril, offers concierge support
services from Hotel Palacio and a
Portugal – although rates for buyers
range of privilege services through
are among the lowest in Europe. an exclusive VIP Card scheme. These
“Banks are not yet being include sports, leisure and wellness
supportive for developers, and the facilities in the region with discounts
same applies for clients to get a varying between 15% to 30% on
mortgage on their property; until Elements Spa by Banyan Tree, Esto-
BUSINESS
ril Golf Course and Cascais Marina.
Although the lower end markets have been hit severely, the high this happens sales will be slow,”
Other developers looking at ways
end residential tourism market remained steady throughout says Eduardo Kol Netto de Almeida, to distinguish their offering include
and especially in isolated pockets like Quinta do Lago in the Marketing Director at CampoReal. L’AND Vineyards, a country resort
Algarve and Quinta da Marinha in Cascais. However, there is an upside to in the Alentejo region with designer
Ole Jespersen, IRG International Realty Group this, he says. “All new or at an early villas surrounded by vineyards where
stage developments have stopped buyers can have their own private
wine production and personal-
campaigns. Let’s also get government different examples that need three or are running very slow. This will
ized bottles. Director Miguel Júdice
tourism and business development different ways to market the product in impact very positively the existing claims this ‘differentiating concept’
agencies involved to support these order to reach the potential target.” developments that have built has helped to place almost half of
efforts to promote Portugal.” Constantino Jordan, Managing properties and are mature.” its inventory already. Silver coast de-
Director of Property & Tourism Rui Parente, of law firm Neville de veloper Bom Successo is launching DEVELOPER
Year of adjustment Advisory, says developers seeing most Rougemont & Associados R.L., also a high-end fractional product after
seeing more interest from buyers
Others believe that product, and the success are those who have adapted highlights an upside to buyers who
“who want a holiday villa that gen-
way it’s packaged, is the issue. Carol to a more sophisticated buyer. “It is have lost finance after valuation erates an income”, according to di-
Mahl, Sales Consultant at Re/Max necessary to analyse everything about decreases. “This has turned into an rector António Silva Pereira. Leisure
Portugal, says 2009 was “a year of a development, from the infrastructure, opportunity for financial institutions Launch, developing on the Silver
adjustment” when a 10-20% decline gardens, architecture, colour schemes to implement new products such Coast and Algarve, is seeing success
in transactions brought prices down right through to sales material,” he says. as ‘real estate leasing’,” he explains, from helping buyers who lost de-
posits and qualified for mortgages
– with the largest decreases in the “The profile of sales and marketing “where the financial institution
on other developers’ failed projects.
Algarve. “I have property that can partners must also suit.” ultimately buys the property from Claiming to have received enquiries
MARKETING
be sold outright or to a fractional Mahl believes international alliances the developer and rents it out to the from distressed buyers from Spain,
ownership, a beautiful licensed manor and referral partners are vital. “Europe buyer for periods of up to 15 years, Bulgaria, Turkey, Dubai, Rumania,
house with more than 400 hectares needs a common MLS, or at least at the end of which, the buyer is and Caribbean, it has worked with
offering potential for an hotel group, between some countries,” she adds. “A entitled to buy the property for a banks to transfer mortgages to its
own projects. “In all cases they have
and family houses in Albufeira that spirit of professionalism and sharing.” residual value.”
recovered their equity and upgraded
are easy to turn into rental businesses Portugal has the product, and the Slow planning has stretched the to a superior quality property ready
with a little bit of organization, wit and appeal, so which areas are likely to see patience of foreign buyers, with to use,” said MD Davide Patricio.
internet connections,” she says. “Three the best activity in 2010? some developers waiting years
36 | DESTINATION FOCUS : PORTUGAL www.opp.org.uk | FEBRUARY 2010
Key developers in the Portuguese property market need to come
together in an association, pool their limited marketing funds,
and develop effective strategies for promoting to and educating
Germans, French, Austrians, Swiss and more.
INDUSTRY
Artur Simes, Atlantic Estates
Viseu – where prices are half that of Did you know?
the Algarve and 54 destinations are Of the 973,209 foreign visitors to
accessible from Porto airport only an Portuguese property portal casa.
hour’s drive away. sapo.pt (which generated 51,500
Boasting the most blue flag beaches leads in September 2009), UK
in Europe, Portugal promises 10 visitors ranked third with around
months of good weather, and a low 12,000 a month.
cost of living – making it ideal as a
Ryanair is to open its 39th base
PEOPLE
retirement destination. The question
is whether Portugal will finally shout at Faro in March this year with six
about its appeal on the world stage. based aircraft and 14 new routes
“The fragmented nature of the (28 in total) being launched –
Market overview | Portugal needs to present a united front to international buyers marketing effort of the Portuguese which will increase traffic at Faro
players and a lack of integrated by around 1.3million.
for planning only for new valuations of government by estate agent marketing planning, budgets and
to make development finance fall body APEMIP to address the issue of public & private sector togetherness Residential tourism consultancy
through. “The Camras [town councils] planning and, with the help of ILM, Viva may mitigate the opportunity to ILM is partnering with agent IRG
International Realty Group over
DESTINATION
are a major drain on progress in In and the Portuguese Chambers of compete for UK buyers with Spain,”
Portugal, still taking far too long to Commerce, has forced it up Portugal’s concludes Andrew Coutts of ILM, the next three months to survey
grant simple planning permissions,” residential tourism agenda. clearly identifying Portugal’s main sales potential demand for holiday
says Graham Cockroft of developer Portugal is smaller than Spain but rival. “The Spanish market with a homes in Madeira and Porto
Wholesale Villas. “Ninety days is ample it’s more than the Algarve and buyers volume of available supply, aggressive Santo, extracting nationalities,
time to check out, consider and fail/ looking for cheaper property are now pricing and a ‘sell or die’ mentality will price paid, budget, location
pass - whichever applies.” looking at the Silver Coast as well represent formidable competition in preferences, type of property, etc.
There has been sustained lobbying as Central Portuguese markets like 2010 for any available demand.”
BUSINESS
What are What are your What have Are discounts
your developer predictions for you learned in the only way to
clients telling second home 2009 that will close sales?
you about the sales in 2010? help you in Madeira is
current market Indications are 2010? maturing at a
and how they that at least the For those with a different pace
are adapting? first semester of realistic idea of to regions like
From our 2010 will con- prices (not ‘cafe the Algarve.
three offices in tinue to present valuations’), We have solid
Portugal - covering the Porto region, difficulties due to the global economic and an eagerness to sell, transactions transactional evidence to show that
DEVELOPER
Lisbon and central region, and Algarve market; but there is still an enormous were possible last year. In the past the current list prices per sq m are within
and south region - we have kept in amount of wealth in Europe. In terms question always seemed to be ‘how 5% of actual prices achieved over
close contact throughout the year with of marketing strategies for the high- can we make another 50 sales?’ This the last 12 months. However, we do
resort developers and tourist operators end segment of second homebuyers, it year the question was ‘how can we have lifestyle and investor offers. For
and there are signs of optimism. We will be very hard to be successful only convert one more sale?’ By dealing with example, buyers can defer 10% with
have witnessed the increasing focus relying on the traditional approach each individual client we have seen an 80% mortgage, which means
on delivering a final product that is to promotion. Developers have to be opportunities that would have been they only need a 10% deposit. We
constantly upgrading, incorporating more and more creative, cleverly using missed in ‘easier’ years. Every penny guarantee to pay off that 10% over 3
new concepts of technology, security their unique selling points and invest in spent on marketing, inspection trips years from net rental income. Buyers
systems, leisure facilities and design. personalized strategies (exclusive and and other incentives has to come from are offered 4 weeks free use each
Doubtless to say, quality is only one very well structured) directly to their somewhere, and that somewhere is year, and 8 weeks at 50% off. This is
part of the puzzle and skilful marketing existing databases. Also relevant to normally the end product, so we focus on fully completed, furnished and
MARKETING
is now, more than ever, an element of mention is the importance of the “word on keeping costs to only the necessary well-serviced resort property with all
distinction, and plays as important a of mouse” (clients and companies items and passing on the saving in the amenities up and running. It is also
role in the individual performance of sharing experiences through the social form of the best golf property prices in fully supported by an excellent rental
each resort as our market as a whole. networks – online communication). the Algarve. management operation.
Luis Infante, Diogo Gaspar Ferreira, James E. Harrison, Roger Still, Development Manager,
Managing Director, Horwath HTL CEO, Vale do Lobo Sales Director, Pestana Properties Palheiro Estate